One question can change your financial trajectory like it has mine.
Why should you know where your money is going?
By Brandon Allen
If you fumbled with answering that question, or can’t answer it at all then you might benefit from a simple strategy that keeps you disciplined and allows you to be deliberate about the money you earn.
People typically perform this strategy naturally in other areas of life, so you might begin to wonder why you wouldn’t have done this earlier. The strategy is really quite simple. All you have to do is…
Open multiple checking accounts and name them based on where you want your money to go.
Okay, that probably sounds crazy. But, let’s say you take all of your clothes and throw them in a pile and just pull them out when you want to wear them. You have no dresser, drawer, or closet, just a pile of clothes. You would waste time digging out the ones you want to wear (having your money in one unorganized pile), all of your dress clothes would be crumbled up and ruined (your money seems to stick around and is often being wasted), and there would be no way to differentiate between dirty clothes (subscriptions you have that you don’t need and don’t even realize you still have). So, what’s the solution? Organize them.
Opening multiple accounts has a host of benefits. You can use what you need, and not dig around elsewhere. It also creates deliberate action, where you must be mindful about what you spend and where it is allocated, allowing you to focus on those future outcomes without haggling with yourself between a Big Mac or putting some money into your bank account.
After implementing this strategy, I went from saving $2,000 a month to $4,000 a month toward investments. I set up accounts for living expenses (think transportations, rent, etc), fun (eating out, movies, etc), food (only what I can cook), large expenses and purchases (a home, car, wedding, etc), and a savings account for retirement. With this setup, I am forced to get clear on how much I want to spend. I don’t have to guess or ballpark how much money I am spending on certain things and how much money I am able to save. I also don’t need to create an over complicated budget. This approach took me only 30 minutes to set up. And it takes 5 minutes to allocate my income each time I get paid.
Each account, with the exception of the savings account, has its own debit card that keeps me disciplined to only spend what is in that account.
So, how can you implement this strategy as well? Here are a few good options to execute on this approach. Capital One allows you to open up multiple accounts online easily. USAA has a minimum of $25 for each account opened. If you’re a service member, Navy Federal allows you to open multiple checking accounts in seconds, with no minimum balance, using their app (how I chose to do it).
Take the time to do an Extreme Home Makeover episode on your financial life, and change your trajectory, as I have mine.
Brandon Allen
